2017-03-14
BOISE, Idaho (March 14, 2017) – Today, the Idaho House passed a
bill that would eliminate state capital gains taxes on gold and silver
specie, and encourage its use as currency. Final approval of the
legislation would help undermine the Federal Reserve’s monopoly on
money.
House Majority Leader Mike Moyle introduced House Bill 206 (H206) on
Feb. 23. The legislation would amend Idaho revenue statutes, providing
“that capital gains and losses on precious metals bullion and monetized
bullion sales be added to or subtracted from Idaho taxable income.”
The House approved H206 by a 56-13 margin.
“According to the U.S. Constitution, Article I, Section 10, there is
only one thing that a state can declare as currency if they think that
our federal currency is going out of whack and some might argue that
they think our federal currency is going out of whack already,” Rep. Ron
Nate said in support of the bill from the House floor.
The Framers of our nation established that gold and silver are money,
but federal taxing authorities in recent decades have required taxpayers
to pay taxes on this form of money when its exchange for Federal
Reserve Notes results in nominal capital “gains.”
Similar to a bill recently passed by Arizona’s state House, Idaho H206
is a revenue neutral proposal over the long run. That’s because both
precious metals gains (income) and losses are backed out of the
calculation of taxable income for Idahoans. While H206’s passage will
have little fiscal impact on Idaho tax revenues, it will have a larger
impact on Idahoans’ freedoms.
Enjoying the backing of the Sound Money Defense League, the Idaho
Freedom Foundation, and Money Metals Exchange (an Idaho-based national
precious metals dealer), the Idaho proposal seeks to correct the
misclassification of precious metals by the IRS as “property” rather
than money. It is only because of this misclassification in the first
place that precious metals income and losses are included in the federal
adjusted gross income number that flows through to the taxpayer’s Idaho
tax return.
Assessing Income Taxes on the Exchange of Money Is Unjust
Income taxes are one major way government bureaucrats penalize holders
of precious metals. If you own gold to protect against the ongoing
devaluation of America’s paper currency (which results from the
inflationary practices of the Federal Reserve), you may end up with a
“gain” on your gold when it’s priced in dollars. Not necessarily a real
gain, mind you. It’s frequently nothing more than a nominal gain – but
it’s nonetheless considered income against which the government assesses
a tax.
The Federal Reserve strives for and openly announces a target inflation
rate, and it’s these policies that cause these artificial “gains” which
precious metals owners experience.
By removing precious metals from the state income tax, Idaho can stop
compounding the problem and instead help promote the adoption and
widespread use of constitutional money.
While Idaho citizens are not currently subjected to “double taxation” in
the form of sales taxes, more than 20 other states do. In most states
with sales taxes, precious metals owners are taxed on their original
purchase and then taxed again if they have nominal “gains” when they
sell their precious metals.
But that’s not all. At the federal level, these dollar-denominated
gains on precious metals are taxed at the discriminatorily high 28
percent long-term capital gains tax rate. Capital gains on other assets
are taxed at 15 percent or 20 percent, depending on one’s income level.
And, unless a state passes a bill like the one under consideration in
Idaho, the “income” one receives from owning and selling gold and silver
increases the taxes they must pay at the state level too.
Passage into law would mark an important step towards currency
competition. If sound money gains a foothold in the marketplace against
Federal Reserve notes, the people would be able to choose the
time-tested stability of gold and silver over the central bank’s
rapidly-depreciating paper currency. The freedom of choice expanded by
H206 would allow idaho residents to secure the purchasing power of their
money.
“This isn’t going to end the fed’s monetary monopoly overnight, but it
sets the foundation and opens the door for more market activity by the
people,” Tenth Amendment Center executive director Michael Boldin said.
“This is an important part of the overall strategy, and activists in
Idaho should continue working to get this bill passed.”
BACKGROUND INFORMATION
Currently, all debts and taxes in Idaho must be paid with either Federal
Reserve Notes (dollars), authorized as legal tender by Congress, or
with coins issued by the U.S. Treasury — very few of which have gold or
silver in them.
But the United States Constitution states in Article I, Section 10, “No
State shall…make any Thing but gold and silver Coin a Tender in Payment
of Debts.”
The Idaho bill take a step towards that constitutional requirement,
ignored for decades in every state. Such a tactic would undermine the
monopoly or the Federal Reserve by introducing competition into the
monetary system.
Professor William Greene is an expert on constitutional tender and said
when people in multiple states actually start using gold and silver
instead of Federal Reserve Notes, it would effectively nullify the
Federal Reserve and end the federal government’s monopoly on money.
“Over time, as residents of the state use both Federal Reserve notes and
silver and gold coins, the fact that the coins hold their value more
than Federal Reserve notes do will lead to a “reverse Gresham’s Law”
effect, where good money (gold and silver coins) will drive out bad
money (Federal Reserve notes). As this happens, a cascade of events can
begin to occur, including the flow of real wealth toward the state’s
treasury, an influx of banking business from outside of the state – as
people in other states carry out their desire to bank with sound money –
and an eventual outcry against the use of Federal Reserve notes for any
transactions.”
Once things get to that point, Federal Reserve notes would become
largely unwanted and irrelevant for ordinary people. Nullifying the Fed
on a state by state level is what will get us there.
UP NEXT
H206 now moves to the Senate for further consideration. At the time of
this report, it had not received a committee assignment.